Bombay High Court Raps SEBI for Non-Compliance with Court’s Directive Against Vineet Jain’s Firm

Bombay High Court Raps SEBI for Non-Compliance with Court’s Directive Against Vineet Jain’s Firm

The Bombay High Court has reprimanded the Securities and Exchange Board of India (SEBI) for its failure to adhere to the Court’s October 23 order regarding the proceedings against Bharat Nidhi Ltd (BNL), a company owned by Times Group owner Vineet Jain.

A Division Bench of Justices GS Kulkarni and Jitendra Jain stated that SEBI, as a public body, bears the responsibility of acting in the public interest and adhering to court orders. Failure to do so would erode public trust in the market regulator’s authority.

The Court held that SEBI is a public body mandated to act in the public interest and must abide by court orders, particularly when those orders have attained finality. It cannot be accepted that SEBI would only take action when instructed to do so by respondents. This approach by SEBI would erode the confidence of investors in the market regulator, which is duty-bound to fulfil the objectives outlined in the Parliament Act.

The Bombay High Court was considering a writ petition filed by minority shareholders of Bharat Nidhi Ltd (BNL) who alleged that the company had violated Securities Laws by failing to maintain the Minimum Public Owning Norm.

Following the complaint, SEBI launched an investigation into the alleged violations. Upon identifying irregularities, SEBI issued a show-cause notice to BNL and its management. However, before the show-cause proceedings reached their conclusion, the notice recipients sought settlement under the SEBI settlement regulations, and the matter was resolved.

Disgruntled by SEBI’s settlement order, the petitioners sought recourse in the High Court.

On October 23, the High Court ordered SEBI to furnish the petitioners with the requested documents when during the petition hearings, the petitioners requested SEBI to provide them with the investigation documents, which SEBI had not yet done.

Both SEBI and BNL, along with Vineet Jain, challenged the High Court’s order, but the Supreme Court upheld it. However, the petitioners allege that they have yet to receive the documents.

Concurrently, SEBI informed the High Court of its decision to revoke the settlement order and contended that this revocation rendered the primary prayers in the petition irrelevant. Additionally, SEBI indicated its intention to proceed with the hearing on the show-cause notice issued to BNL and its management.

The High Court, however, disagreed with this assertion, as the petitioners also sought orders compelling SEBI to ensure complete and accurate disclosure of all information pertaining to BNL.

The Court ruled that the petitioners would not be denied access to information about BNL’s operations, despite the settlement agreement being revoked.

The Bench asserted that while a private company might prioritise its business interests over adhering to Court orders, SEBI, as a public regulatory body, was bound to comply with the High Court’s directives.

“Respondent Nos.2 to 9 in their business interest may overlook the solemnity of the orders passed by this Court, however, SEBI in its public character cannot take the same approach. In these circumstances, the order dated October 23 cannot be rendered nugatory. The SEBI is required to holistically consider such orders and not merely in the context of the settlement proceedings, as such order considers the substantive rights of the petitioners, who are shareholders of BNL, having equal rights to that of respondent nos. 3 to 9. SEBI cannot have different yardstick between shareholders,” the Court ruled and directed SEBI to comply with its October 23 order.

Representing the shareholders, Senior Advocate Gaurav Joshi and Advocate Arti Raghavan, briefed by JSA Advocates & Solicitors, made their appearance. On behalf of SEBI, Senior Advocate JJ Bhat, along with advocate Mihir Mody and briefed by K Ashar & Co., presented the case. The legal team for BNL and Vineet Jain included Senior Advocates Janak Dwarkadas, Rahul Narichania, and Ashish Kamat, as well as advocate Ameya Gokhale, all of whom were briefed by Shardul Amarchand Mangaldas & Co.